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Pricing and lot sizing for an EPQ inventory model with rework and multiple shipments

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Abstract

This paper deals with an economic production quantity (EPQ) inventory model with reworkable defective items when a given multi-shipment policy is used. In this work, it is assumed that in each cycle, the rework process of all defective items starts when the regular production process finishes. After the rework process, a portion of reworked items fails. This portion becomes scrap and only the perfect finished items can be delivered to customers at the end of rework process. A profit function is derived to model the inventory problem and it is shown that the profit function is concave. Due to the complexity of the optimization problem, an algorithm is developed to determine the optimal values of manufacturing lot size and price such that the long-run average profit function is maximized. Furthermore, two special cases are identified and explained. Finally, a numerical example is given to illustrate the applicability of the proposed inventory model.

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Acknowledgments

The authors thank the three anonymous reviewers for their helpful suggestions which have strongly enhanced this paper. The first author would like to thank the financial support of the University of Tehran for this research under grant number 30015-1-03. The research for the third author was supported by Tecnológico de Monterrey Research Group in Industrial Engineering and Numerical Methods 0822B01006.

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Authors and Affiliations

  1. School of Industrial Engineering, College of Engineering, University of Tehran, Tehran, Iran

    Ata Allah Taleizadeh & Solaleh Sadat Kalantari

  2. School of Engineering and Sciences, Tecnológico de Monterrey, E. Garza Sada 2501 Sur, C.P. 64849, Monterrey, Nuevo León, Mexico

    Leopoldo Eduardo Cárdenas-Barrón

Authors
  1. Ata Allah Taleizadeh
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  2. Solaleh Sadat Kalantari
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  3. Leopoldo Eduardo Cárdenas-Barrón
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Correspondence to Leopoldo Eduardo Cárdenas-Barrón.

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Taleizadeh, A.A., Kalantari, S.S. & Cárdenas-Barrón, L.E. Pricing and lot sizing for an EPQ inventory model with rework and multiple shipments. TOP 24, 143–155 (2016). https://doi.org/10.1007/s11750-015-0377-9

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  • DOI: https://doi.org/10.1007/s11750-015-0377-9

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